Tax plan worries cities

Gov. Arnold Schwarzenegger’s proposal to eliminate the state sales tax on gasoline and replace it with a fixed excise tax will not affect funds for local road management, according to the state legislative analyst’s office, but Newport Beach and Costa Mesa officials are still worried about what might happen to funding for fixing local roads.

“We’re really not sure what’s going to happen — whether the money is going to be given a new name and still given back to us or not. We’ll just have to wait and see,” Newport Beach City Manager Dave Kiff said.

Newport Beach gets about $1 million in gas tax revenue each year to maintain local streets and sidewalks, Kiff said. The city is counting on next year’s funds to do repairs on Irvine Avenue and in the Central Balboa area, he said. If funding disappears, those projects may have to be re-prioritized, Kiff said.

Costa Mesa gets about $2.6 million in gas tax money each year, City Manager Allan Roeder said.

“We have been trying to play catch-up on street repairs for a number of years,” Roeder said. “We’ve made great progress catching up and repaving streets, curbs and gutters, but it would be a real travesty when we’re finally getting things close to the level at which they should be, only to have the state pull the rug out from under us.”

Struggling with slumping sales tax revenue, Costa Mesa has already reduced its annual operating budget significantly over the past few years, cutting almost $20 million in expenses in the past year alone Roeder said.

“The options are pretty bleak,” if money for road repairs disappears, he said.

The governor’s plan would replace the sales tax on gas, taken as a percentage of the total purchase, and replace it with an increase in the state’s per-gallon gas excise tax, from 18 cents to 28.8 cents.

That change would result in a consumer savings of about 5 cents per gallon of gasoline, while maintaining funds for local street repairs that would have otherwise been distributed as sales tax revenues, according to the California Department of Finance.

“The intent is that it will not have an impact on roads and highways,” said Dana Curry, a director of the legislative analyst office’s division on transportation, business and housing.

City officials in Newport Beach and Costa Mesa fear those funds might be cut or allocated for projects by a state agency, rather than being spent at the discretion of city employees.

Although that does not appear to be part of the governor’s proposal, officials did not rule out that cities could end up losing funds after a finalized budget is negotiated.

The governor and lawmakers unexpectedly zeroed in on county and city funds a year ago while attempting to solve revenue shortfalls totaling about $60 billion.

Legislators then approved an $800-million take-away of local gas tax revenues, although that move was eventually reversed in the courts.

The change in the state’s funding formulas will allow the state to cut its sales-tax-funded contributions to transportation, leading to reduced output from its general fund.

Although the plan would result in $836 million in education spending, the Newport-Mesa Unified School District would be largely unaffected. Newport-Mesa is designated as a basic aid school district, meaning its operating expenses are covered by local property tax revenue.

The plan would also bring in less tax revenue for public transit and transportation than the previous year’s funding formula, by nearly $976 million.

That change will not result in lower spending on public transportation projects in 2010-11, although state general-fund spending for that purpose will be reduced over time because of the adjustment, said H.D. Palmer, a spokesman for the Department of Finance.